G20 HIGH-LEVEL PRINCIPLES ON FINANCIAL CONSUMER PROTECTION

Transcription

1 G20 HIGH-LEVEL PRINCIPLES ON FINANCIAL CONSUMER PROTECTION October 2011 The high-level principles were developed as a response to the G20 Finance Ministers and Central Bank Governors call in February 2011 for the OECD, the FSB and other relevant international organisations to develop common principles on consumer protection in the field of financial services by their October meeting. They were developed by the Task Force on Financial Consumer Protection of the OECD Committee on Financial Markets (CMF), in close co-operation with the FSB and its Consultative Group, other international organisations and standard setter bodies and consumer and industry associations. The Task Force is open to all G20 and FSB members. It held several rounds of consultations, including a public one, on different versions of the draft principles. A final version of the draft principles was discussed and endorsed by the Task Force on 14 September and transmitted to the CMF and the FSB. The Final High-level Principles on Financial Consumer Protection were endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting on October For further information please contact Mr. André Laboul, Head of the Financial Affairs Division, OECD [Tel: ; Fax: ; or Mr. Michael Chapman, Senior Policy Expert, Financial Affairs Division, OECD [Tel: ; Fax: ; Organisation for Economic Co-operation and Development, 2 rue André-Pascal, Paris cedex 16, France

2 2

3 At the occasion of their February 2011 meeting in Paris, the G20 Finance Ministers and Central Bank Governors called on the OECD, the Financial Stability Board (FSB) and other relevant international organisations to develop common principles on consumer protection in the field of financial services by the time of their fall meeting in October As requested and agreed by the G20 French Presidency and the FSB, the development of these Principles was being led by the OECD. The high-level principles are designed to assist G20 countries and other interested economies to enhance financial consumer protection. The principles complement and do not substitute any existing international principles and/or guidelines. In particular they do not address sectoral issues dealt with by standard setter bodies such as BCBS, IAIS and IOSCO. These (non binding) principles will be applicable across all financial services sectors. The OECD coordinating work on the principles was mainly channelled through the Task Force on Financial Consumer Protection of the Committee on Financial Markets which is open to all G20 and FSB members, and other relevant international organisations and standard setter bodies. Inputs on financial education issues were provided through the OECD International Network on Financial Education (INFE) which comprises representatives from institutions from 90 economies, including all G20 countries. The Task Force held three physical meetings in April, June and September. But several rounds of written consultations have also been organised on different versions of the draft principles. These consultations have included not only the members of the Task Force but also the members of a FSB consultative group, four OECD Committees, relevant international organisations, standard setter bodies and networks and consumer and industry associations. A sixth version of the draft principles was circulated for public consultation until 31 August The consultation allowed numerous major stakeholders (governments, consumer and industry associations, trade unions and other relevant individual institutions) to provide further comments. A seventh version was discussed by the Task Force on 14 September when final amendments by the Task Force were approved and confirmed through a written process. A final ninth version of the draft Principles was submitted to the Committee on Financial Markets (CMF) and the Financial Stability Board (FSB). This document reflects the Final High-level Principles on Financial Consumer Protection which were endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting on October This complements the G20 leaders call at the November 2010 Seoul Summit. The G20 leaders asked the FSB to work in collaboration with the OECD and other international organisations to explore, and report back at the next summit, options for advancing financial consumer protection through informed choices that include disclosure; transparency and education; protection from fraud, abuse and errors; along with recourse and advocacy. This report will concentrate on aspects linked to consumer credit and focus largely (but not necessarily exclusively) on related financial stability issues. 3

4 FRAMEWORK Consumer confidence and trust in a well-functioning market for financial services promotes financial stability, growth, efficiency and innovation over the long term. Traditional regulatory and supervisory frameworks adopted by oversight bodies contribute to the protection of consumers which is often and increasingly recognised as a major objective of these bodies together with financial stability. However, and while it already exists in several jurisdictions, additional and/or strengthened dedicated and proportionate policy action to enhance financial consumer protection is also considered necessary to address recent and more structural developments. This renewed policy and regulatory focus on financial consumer protection results inter alia from the increased transfer of opportunities and risks to individuals and households in various segments of financial services, as well as the increased complexity of financial products and rapid technological change, all coming at a time when basic access to financial products and the level of financial literacy remain low in a number of jurisdictions. Rapid financial market development and innovation, unregulated or inadequately regulated and/or supervised financial services providers, and misaligned incentives for financial services providers can increase the risk that consumers face fraud, abuse and misconduct. In particular, low-income and less experienced consumers often face particular challenges in the market place. In light of these issues, financial consumer protection should be reinforced and integrated with other financial inclusion and financial education policies. This contributes to strengthening financial stability. It is essential to protect consumers rights while also recognising the fact that these rights do come with consumer responsibilities. This calls for legal recognition of financial consumer protection, oversight bodies with necessary authority and resources to carry out their mission, fair treatment, proper disclosure, improved financial education, responsible business conduct by financial services providers and authorised agents, objective and adequate advice, protection of assets and data including from fraud and abuse, competitive frameworks, adequate complaints handling and redress mechanisms and policies which address, when relevant, sectoral and international specificities, technological developments and special needs of vulnerable groups. This approach complements and builds upon financial regulation and supervision and financial governance. In order to ensure effective and proportionate financial consumer protection regimes, it is important that all stakeholders participate in the policy making process. The principles are addressed to G20 members and other interested economies and are designed to assist the efforts to enhance financial consumer protection. They are voluntary principles, designed to complement, not substitute for, existing international financial principles or guidelines. In particular, they do not address sector specific issues dealt with by the relevant international organisations and the financial standard setters (such as BCBS, IAIS and IOSCO). Different kinds of transactions present different risk profiles. The principles may need to be adapted to specific national and sectoral contexts and should be reviewed periodically by relevant international bodies. 2 All G20 members and other interested economies should assess their national frameworks for financial consumer protection in the light of these principles and promote international co-operation to support the strengthening of financial consumer protection in line with, and building upon, the principles. 2 This could, in particular, include voluntary peer reviews by OECD, FSB, World Bank and standard setting bodies such as BCBS, IAIS and IOSCO. 4

5 PRINCIPLES 1. Legal, Regulatory and Supervisory Framework Financial consumer protection should be an integral part of the legal, regulatory and supervisory framework, and should reflect the diversity of national circumstances and global market and regulatory developments within the financial sector. Regulation should reflect and be proportionate to the characteristics, type, and variety of the financial products and consumers, their rights and responsibilities and be responsive to new products, designs, technologies and delivery mechanisms. 3 Strong and effective legal and judicial or supervisory mechanisms should exist to protect consumers from and sanction against financial frauds, abuses and errors. Financial services providers and authorised agents 4 should be appropriately regulated and/or supervised, with account taken of relevant service and sector specific approaches. Relevant non-governmental stakeholders including industry and consumer organisations, professional bodies and research communities should be consulted when policies related to financial consumer protection and education are developed. Access of relevant stakeholders and in particular consumer organisations to such processes should be facilitated and enhanced. 2. Role of Oversight Bodies There should be oversight bodies (dedicated or not) explicitly responsible for financial consumer protection, with the necessary authority to fulfil their mandates. They require clear and objectively defined responsibilities and appropriate governance; operational independence; accountability for their activities; adequate powers; resources and capabilities; defined and transparent enforcement framework and clear and consistent regulatory processes. Oversight bodies should observe high professional standards, including appropriate standards of confidentiality of consumer and proprietary information and the avoidance of conflicts of interest. Co-operation with other financial services oversight authorities and between authorities or departments in charge of sectoral issues should be promoted. A level playing field across financial services should be encouraged as appropriate. International co-operation between oversight bodies should also be encouraged, while specific attention should be considered for consumer protection issues arising from international transactions and cross-border marketing and sales. 3. Equitable and Fair Treatment of Consumers All financial consumers should be treated equitably, honestly and fairly at all stages of their relationship with financial service providers. Treating consumers fairly should be an integral part of the good governance and corporate culture of all financial services providers and authorised agents. Special attention should be dedicated to the needs of vulnerable groups. 3 Where relevant, appropriate mechanisms should be developed to address new delivery channels for financial services, including through mobile, electronic and branchless distribution of financial services, while preserving their potential benefits for consumers. 4 Authorised agents are understood to mean third parties acting for the financial services provider or in an independent capacity. They include any agents (tied and independent agents) brokers, advisors and intermediaries, etc. 5

6 4. Disclosure and Transparency Financial services providers and authorised agents should provide consumers with key information that informs the consumer of the fundamental benefits, risks and terms of the product. They should also provide information on conflicts of interest associated with the authorised agent through which the product is sold. 5 In particular, information should be provided on material aspects of the financial product. Appropriate information should be provided at all stages of the relationship with the customer. All financial promotional material should be accurate, honest, understandable and not misleading. Standardised precontractual disclosure practices (e.g. forms) should be adopted where applicable and possible to allow comparisons between products and services of the same nature. Specific disclosure mechanisms, including possible warnings, should be developed to provide information commensurate with complex and risky products and services. Where possible consumer research should be conducted to help determine and improve the effectiveness of disclosure requirements. The provision of advice should be as objective as possible and should in general be based on the consumer s profile considering the complexity of the product, the risks associated with it as well as the customer s financial objectives, knowledge, capabilities and experience. Consumers should be made aware of the importance of providing financial services providers with relevant, accurate and available information. 5. Financial Education and Awareness Financial education and awareness should be promoted by all relevant stakeholders and clear information on consumer protection, rights and responsibilities should be easily accessible by consumers. Appropriate mechanisms should be developed to help existing and future consumers develop the knowledge, skills and confidence to appropriately understand risks, including financial risks and opportunities, make informed choices, know where to go for assistance, and take effective action to improve their own financial well-being. The provision of broad based financial education and information to deepen consumer financial knowledge and capability should be promoted, especially for vulnerable groups. Taking into account national circumstances, financial education and awareness should be encouraged as part of a wider financial consumer protection and education strategy, be delivered through diverse and appropriate channels, and should begin at an early age and be accessible for all life stages. Specific programmes and approaches related to financial education should be targeted for vulnerable groups of financial consumers. All relevant stakeholders should be encouraged to implement the international principles and guidelines on financial education developed by the OECD International Network on Financial Education (INFE). Further national and international comparable information on financial education and awareness should be compiled by national institutions and relevant international organisations in order to assess and enhance the effectiveness of approaches to financial education. 5 Financial services providers and authorised agents should provide clear, concise, accurate, reliable, comparable, easily accessible, and timely written and oral information on the financial products and services being offered, particularly on key features of the products and (where relevant) on possible alternative services or products, including simpler ones, they provide. In principle, information should include prices, costs, penalties, surrender charges, risks and termination modalities. 6

7 6. Responsible Business Conduct of Financial Services Providers and Authorised Agents Financial services providers and authorised agents should have as an objective, to work in the best interest of their customers and be responsible for upholding financial consumer protection. Financial services providers should also be responsible and accountable for the actions of their authorised agents. Depending on the nature of the transaction and based on information primarily provided by customers financial services providers should assess the related financial capabilities, situation and needs of their customers before agreeing to provide them with a product, advice or service. Staff (especially those who interact directly with customers) should be properly trained and qualified. Where the potential for conflicts of interest arise, financial services providers and authorised agents should endeavour to avoid such conflicts. When such conflicts cannot be avoided, financial services providers and authorised agents should ensure proper disclosure, have in place internal mechanisms to manage such conflicts, or decline to provide the product, advice or service. The remuneration structure for staff of both financial services providers and authorised agents should be designed to encourage responsible business conduct, fair treatment of consumers and to avoid conflicts of interest. The remuneration structure should be disclosed to customers where appropriate, such as when potential conflicts of interest cannot be managed or avoided. 7. Protection of Consumer Assets against Fraud and Misuse Relevant information, control and protection mechanisms should appropriately and with a high degree of certainty protect consumers deposits, savings, and other similar financial assets, including against fraud, misappropriation or other misuses. 8. Protection of Consumer Data and Privacy Consumers financial and personal information should be protected through appropriate control and protection mechanisms. These mechanisms should define the purposes for which the data may be collected, processed, held, used and disclosed (especially to third parties). The mechanisms should also acknowledge the rights of consumers to be informed about data-sharing, to access data and to obtain the prompt correction and/or deletion of inaccurate, or unlawfully collected or processed data. 9. Complaints Handling and Redress Jurisdictions should ensure that consumers have access to adequate complaints handling and redress mechanisms that are accessible, affordable, independent, fair, accountable, timely and efficient. Such mechanisms should not impose unreasonable cost, delays or burdens on consumers. In accordance with the above, financial services providers and authorised agents should have in place mechanisms for complaint handling and redress. Recourse to an independent redress process should be available to address complaints that are not efficiently resolved via the financial services providers and authorised agents internal dispute resolution mechanisms. At a minimum, aggregate information with respect to complaints and their resolutions should be made public. 10. Competition Nationally and internationally competitive markets should be promoted in order to provide consumers with greater choice amongst financial services and create competitive pressure on providers to offer competitive products, enhance innovation and maintain high service quality. Consumers should be able to search, compare and, where appropriate, switch between products and providers easily and at reasonable and disclosed costs. 7

UPDATE REPORT ON THE WORK TO SUPPORT THE IMPLEMENTATION OF THE G20 HIGH- LEVEL PRINCIPLES ON FINANCIAL CONSUMER PROTECTION G20/OECD TASK FORCE ON FINANCIAL CONSUMER PROTECTION Principles 4, 6 and 9 SEPTEMBER

THE CHAIRMAN 22 February 2016 To G20 Finance Ministers and Central Bank Governors The more difficult economic and financial conditions since the start of this year reflect in part downward revisions to

G20/OECD HIGH-LEVEL PRINCIPLES OF LONG-TERM INVESTMENT FINANCING BY INSTITUTIONAL INVESTORS July 2013 This document contains the eighth version of the G20/OECD High-Level Principles on Long-Term Investment

Recommendation of the Council on Good Practices on Financial Education and Awareness Relating to Credit 25 May 2009 - C(2009)62 FINANCIAL MARKETS. and C(2009)62/CORR1 THE COUNCIL, Having regard to Article

30 March 2015 Global Preamble: Codes of Best Market Practice and Shared Global Principles 1 The wholesale foreign exchange (FX) market is a global market used by banks and other institutions, as well as

REGULATORY GUIDE 178 Foreign collective investment schemes June 2012 About this guide This guide is for operators of foreign collective investment schemes (FCIS) that are authorised in other jurisdictions

Memorandum of Understanding between the Financial Conduct Authority and the Bank of England, including the Prudential Regulation Authority Purpose and scope 1. This Memorandum of Understanding (MoU) sets

OECD/INFE HIGH-LEVEL PRINCIPLES ON NATIONAL STRATEGIES FOR FINANCIAL EDUCATION August 2012 The High-level Principles on National Strategies for Financial Education were developed by the OECD International

for Principles of Consumer Protection Electronic Commerce A Canadian Framework Working Group on Electronic Commerce and Consumers for Principles of Consumer Protection Electronic Commerce A Canadian Framework

THE JOINT FORUM BASEL COMMITTEE ON BANKING SUPERVISION INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS C/O BANK FOR INTERNATIONAL SETTLEMENTS CH-4002

29 August 2013 Credit Rating Agencies Reducing reliance and strengthening oversight Progress report to the St Petersburg G20 Summit Authorities need to accelerate work to end the mechanistic reliance of

CEIOPS-DOC-15/09 26 March 2009 Guidelines on preparation for and management of a financial crisis in the Context of Supplementary Supervision as defined by the Insurance Groups Directive (98/78/EC) and

OECD/INFE GUIDELINES FOR PRIVATE AND NOT-FOR-PROFIT STAKEHOLDERS IN FINANCIAL EDUCATION The Guidelines were developed by the OECD International Network on Financial Education (INFE), comprising now representatives

Mutual Learning Programme A Review of the Consumer Protection Function of the Central Bank of Ireland The Netherlands Authority for the Financial Markets The AFM promotes fairness and transparency within

INSURANCE BROKERS CODE OF PRACTICE BUILDING PROFESSIONAL COMPETENCE AND CONSUMER CONFIDENCE The insurance broking profession is about helping you to navigate the unavoidable complexities of insurance products

Building Public Trust: Ethics Measures in OECD Countries Annex 1998 Recommendation of the OECD Council on Improving Ethical Conduct in the Public Service, 36 Including Principles for Managing Ethics in

Accountability: Data Governance for the Evolving Digital Marketplace 1 1 For the past three years, the Centre for Information Policy Leadership at Hunton & Williams LLP has served as secretariat for the

THE EDINBURGH PLAN OF ACTION FOR THE COMMONWEALTH FOR THE DEVELOPMENT, PROMOTION, AND IMPLEMENTATION OF THE COMMONWEALTH (LATIMER HOUSE) PRINCIPLES ON THE ACCOUNTABILITY OF AND RELATIONSHIP BETWEEN THE

Access to justice arrangements Productivity Commission Inquiry Introduction This is the submission by the Financial Ombudsman Service (FOS) in response to the issues paper released in September 2013 for

PUMA POLICY BRIEF PRINCIPLES FOR MANAGING ETHICS IN THE PUBLIC SERVICE OECD RECOMMENDATION The OECD Council adopted a Recommendation on Improving Ethical Conduct in the Public Service on 23 April 1998.

This guide sets out key information for state sector agencies about developing and operating an effective complaints process. It also provides information about the Ombudsman s role, as an independent,

Isle of Man Government Commitment to Combating Money Laundering and the Financing of Terrorism & Proliferation Council of Ministers June 2012 Isle of Man Government Commitment to Combating Money Laundering

GUIDELINE ON THE APPLICATION OF THE OUTSOURCING REQUIREMENTS UNDER THE FSA RULES IMPLEMENTING MIFID AND THE CRD IN THE UK This Guideline does not purport to be a definitive guide, but is instead a non-exhaustive

The Responsibilities of Providers and Distributors for the Fair Treatment of Customers (RPPD) 1.1 1.2 Introduction In this Regulatory Guide ("Guide") we give our view on what the combination of Principles

Microinsurance Policy Paper Ghana: Creating an Enabling Legal and Regulatory Environment for Microinsurance in Ghana Final Report 31 st March 2010 1. Background to and Rationale for the Policy Paper The

APPLICATION of KING III CORPORATE GOVERNANCE PRINCIPLES 2013 Application of Corporate Governance Principles This table is a useful reference to each of the principles and how, in broad terms, they have

CONSULTATION PAPER NO 2. 2004 REGULATION OF GENERAL INSURANCE MEDIATION BUSINESS This consultation paper explains the need for the Island to regulate general insurance mediation business and examines the

2015 Principles of Best Practice applicable to the distribution of Life Insurance Products on a Cross-border Basis within the EU or a Third Country 1 Principles of Best Practice applicable to the distribution

STATEMENT OF INTENT BY THE LONG-TERM INSURANCE INDUSTRY AND THE MINISTER OF FINANCE AS TO THE MEASURES THAT WILL BE IMPLEMENTED IN RESPECT OF RETIREMENT ANNUITY FUND MEMBER POLICIES AND OTHER SAVINGS PRODUCTS

Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development RECOMMENDATION OF THE OECD COUNCIL CONCERNING GUIDELINES FOR CONSUMER PROTECTION IN THE

PRINCIPLES ON OUTSOURCING OF FINANCIAL SERVICES FOR MARKET INTERMEDIARIES TECHNICAL COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS FEBRUARY 2005 Preamble The IOSCO Technical Committee

Guidelines for the Development and Stability of the Financial Market of the Russian Federation for the Period of 2016 2018 (Draft) December, 2015 2 The Bank of Russia s first strategic document on financial

Code of Practice for Directors This Code provides guidance to directors to assist them in carrying out their duties and responsibilities in accordance with the highest professional standards. 1.0 INTRODUCTION

NATIONAL COMMERCIAL BANK JAMAICA LIMITED BOARD CHARTER National Commercial Bank Jamaica Limited has adopted the following Charter to guide the Bank and its subsidiaries ( The Group ) in the execution of

INSURANCE BROKERS CODE OF PRACTICE INSURANCE BROKERS CODE OF PRACTICE OVERVIEW 4-5 IMPORTANT BACKGROUND INFORMATION What does the Code do for you? (Code Objectives) How to navigate the Code How up to date

EN ECB-PUBLIC OPINION OF THE EUROPEAN CENTRAL BANK of 19 October 2015 on the regulation of financial leasing and financial leasing companies activities (CON/2015/37) Introduction and legal basis On 4 September

INVESTMENT MANAGEMENT RISK ASSESSMENT: MARKETING AND SELLING PRACTICES A REPORT OF THE TECHNICAL COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS SEPTEMBER 2003 INVESTMENT MANAGEMENT

COMMUNIQUÉ ON PRINCIPLES FOR INTERNET POLICY-MAKING OECD HIGH LEVEL MEETING ON THE INTERNET ECONOMY, 28-29 JUNE 2011 The Seoul Declaration on the Future of the Internet Economy adopted at the 2008 OECD

CHAPTER SUMMARY: INVESTMENT Investment rules are included in trade agreements such as the TPP because of the importance governments attach to guaranteeing the high standards of governance that are pivotal

INTRODUCTION CONSUMER COUNCIL RESPONSE TO A CONSULTATION PAPER ON DRAFT GUIDELINES FOR THE REGULATION OF AUTOMATED TRADING SERVICES 1. The Council welcomes the Securities and Futures Commission s (SFC)

Financial Action Task Force Groupe d action financière An introduction to the FATF and its work What is the FATF? What are the FATF Recommendations? What are the benefits of implementing the FATF Recommendations?

Outsourcing Risk Guidance Note for Banks Part 1: Definitions Guideline 1 For the purposes of these guidelines, the following is meant by: a) outsourcing: an authorised entity s use of a third party (the

APRA S FIT AND PROPER REQUIREMENTS Consultation Paper Australian Prudential Regulation Authority PREAMBLE APRA was created out of the Government s financial sector reforms that were implemented as a result

PRINCIPLES ON OUTSOURCING OF FINANCIAL SERVICES FOR MARKET INTERMEDIARIES A CONSULTATION REPORT OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS STANDING COMMITTEE 3 ON MARKET INTERMEDIARIES

PRIVATE HEALTH INSURANCE INTERMEDIARIES DOCUMENT 1: Self-Audit Guide for All Members of PHIIA JUNE 2015 VERSION 2 9 For All Members of PHIIA Code Compliance Committee Private Health Insurance Intermediaries

www.pwc.com/za/retail-and-consumer Knowledge is power Consumer Protection Act Series #1 Make sure you don t get it wrong on consumer rights November 2010 In this issue: We provide an overview of the Consumer

Review of Conduct of Business Rules for Financial Services Providers March 2004 CONSULTATION PAPER CP2 Table Of Contents Introduction 3 Purpose of this review 4 Guiding Principles 4 To whom do the codes